Poker takes a hit as the Feds crack down on internet gambling

Poker players are notorious for telling hard-luck stories about the ace that came from out of nowhere to ransack their chips or the unlikely run of bad cards that annihilated a shot at tournament millions. For many players, the last 19 months feel like the ugly epitome of an unending bad beat. It began on April 15 of last year—a day quickly dubbed Black Friday—when online poker was officially criminalized by the United States Department of Justice. The three major sites that offered online poker in the U.S. were suddenly, unceremoniously shut down. Two of those sites—Full Tilt Poker and UltimateBet—proved to be completely insolvent and unable to pay players the money that they had on deposit. In the case of Full Tilt, this meant that players were out $150 million all told.

Soon after, a high-stakes sports bettor of my acquaintance jokingly asked me to name the players who would be relieved about the customers of Full Tilt and UltimateBet getting stiffed. I told him that I had no idea. He reeled off the monikers of several pros who had been accused of financial misdeeds and various infractions in the poker world. The implication being that the damages of their alleged capers were nothing compared to the Full Tilt debacle and that in the wake of it, their various misdeeds would be forgotten. More or less, my friend was correct about these transgressions falling by the wayside. Nobody mentions them or complains about them anymore. The bar has gotten so high that a few million dollars seems to no longer matter.

Not only did the $150 million crap-out cripple loads of individual poker players, but it also took a fortune out of the overall poker economy while America was still recovering from a nasty recession. Big games in Vegas dried up, leaving still-solvent high-stakes players commuting to the poker rooms of Macau where gambling money continues to flow freely. Many of those who didn’t feel like traversing the globe to play live left the United States and set up residencies as near as Canada and as far away as Australia.

On the poker-centric bulletin board twoplustwo.com the chatter turned from strategy and gossip to rumors of once high-flying pros being suddenly broke and the feasibility of grinding online games while living in Thailand. “I was pretty sure I would leave the United States immediately [after the sites were shut down],” says Phil Galfond, an extremely successful 20-something pro who, along with his pal Tom “durrrr” Dwan, vowed to put $1 million of his own money toward paying players who had been screwed by Full Tilt, even though he had absolutely nothing to do with the site. Now splitting his time between luxury apartments in Vancouver, Las Vegas and New York City, he adds, “For me it’s a lot more profitable to play online, and live poker takes a real toll on you. You need to look out for yourself a lot more. Online, it’s just playing the game.”

Even with available options for players who could take the financial beating of Full Tilt, the game, as it came to be played at the World Series, has been largely sapped of its financial potential. As the Series unfolded this past summer, mourned are the days when you could be paid six-figure sums for wearing patches bearing poker-site logos on TV. One afternoon I sit alongside Brian Balsbaugh, the poker agent of choice for manageable pros, as he watches his prize client Daniel Negreanu struggle through a tough Series field. Between hands, he tells me, “After I heard that the sites had shut down, I told my wife that everything we worked for was now over. I literally was crying.”

Saved by European clients and a smattering of Americans who retained their deals on PokerStars (which still thrives outside of the U.S.), Balsbaugh has pretty much landed on his feet. But, clearly, things are not the way they used to be. New sponsorship deals, of any size, have pretty much gone out the window for American pros. All the poker that we loved watching on TV got kyboshed ever since the sites ceased bankrolling the programs. Almost overnight, the profile of the game plummeted. For young guns who saw themselves with no good reason to be untrusting, a certain amount of innocence vaporized.

Call them naïve but some of the game’s craftiest wiz kids kept small fortunes in poker money on the sites. When Full Tilt went belly up, the starkest victim may have been Daniel Cates, a 23-year-old savant who played under the name Jungleman12. He had millions of dollars deposited. It was his life savings, all earned by beating the nosebleed games on Tilt. Prior to the start of the Series, he understates, “Losing out on that money readjusted my view a little bit. Now I try to keep things in perspective and not be tilted about what happened.” He hesitates for a beat, then adds, “Having money on a poker site is not the same as having it in a bank.”

In light of all that, I experience surprise and skepticism when it is announced that there will be a $1 million buy-in tournament taking place toward the end of this past summer’s World Series of Poker. More surprising is the fact that the event, dubbed the Big One for One Drop, quickly sells out with 48 players buying in. It’s as if they can’t get their money up quickly enough and shut-out players are eagerly waiting in the wings.

One high-rolling pro, Gus Hansen, gains entry only by purchasing a seat from a satellite winner. When he busts out early, Hansen shrugs it off as if he has dropped a few dollars in a casual home game. “I just played the worst poker of my life,” he mutters through a brittle smile. Never mind that investors back most of the pros or that the wealthy businessmen are there for kicks and to help out a good cause ($111,111 of each entry fee goes to Cirque du Soleil founder Guy Laliberté’s pet charity One Drop, which strives to provide clean water for people around the world), this $48 million splurge seems to say something positive about the game’s enduring vitality and perception.

Big money aside, the most shocking moment of the tournament comes for me personally when a well-connected friend sidles up to me as the players compete at a final table. “Can you take off your journalist’s hat for a minute?” he asks. “I need to tell you something important, but you can’t write about it and you can’t tell anyone.” Okay. “PokerStars [the very solvent online poker company] is going to buy Full Tilt.” I quickly inquire, in a too-loud voice, if that means that the players will get paid back. My friend shushes me and briskly walks away.

News of the sale remains quiet for the following four weeks. So quiet, in fact, that I figure my friend was misinformed or that the deal has fallen through. But, of course, as everyone who follows this sort of thing now knows, on July 31 the transfer does happen. In a backroom deal brokered by the DOJ, PokerStars purchases Full Tilt. It gets announced that players in America and abroad will be paid off. Optimists view the event as the first step toward legalization of online poker in the United States.

Then it is revealed that the DOJ plans to make the American payoffs as it sees fit—i.e., when, if, and how the Justice Department feels like it. Soon after, Republicans at the presidential GOP convention in Tampa voice support for the prohibition of online gambling. Legislation to legalize the game nationally seems to have stalled out. Save for recently enacted sate laws that will allow online poker to be played within Nevada and casino-friendly Delaware, nothing really seems to have materially changed.

Clearly, the likelihood for legalization of poker across the U.S. is not in the immediate offing. “I expect that [state-by-state legalization] will be a litmus test,” says veteran poker pro Barry Greenstein. “It will become clear that it’s not terrorists or bunches of young kids or gambling addicts playing poker. [Lawmakers] will see that it’s mostly people who like to play games and have a couple hundred bucks in their accounts. Maybe these Reefer Madness worries will go away.” A best-case scenario would lead to some kind of wide-reaching legalization, even if it is state by state. If that were to happen, Greenstein says, “I’ll be looking forward to a second poker boom.”

But professional poker players can’t wait for that. Greenstein, who still benefits from his sponsorship deal with PokerStars, talks about “having been literally decimated” by poker’s downturn, gone from playing $2,000/$4,000 no limit to $200/$400 and having his income cut by some 90 percent.

Back in the day, when more money was floating around the live and online scenes, Greenstein and most of his poker-playing compatriots spent their profits as if the card party would never end. On top of that, he adds, “A lot of us poker players are notoriously bad stock investors. While I still make more money at poker than I could in the private sector”— before turning to poker fulltime, Greenstein had been a software developer in Silicon Valley—“I struggle to meet my financial responsibilities and have cut things back.”

What happens if online poker doesn’t return the way Greenstein hopes and the economy fails to suddenly jack up with the kind of money that made things so lucrative for the pros? “The game will go back to what it was before,” he says, leaving the impression that it will be workable. “But that’s okay for me. I’m not flamboyant and I don’t mind working hard. People made money at poker before online, and we’ll make money at it after online.”

As rough as it’s been for the Greensteins of the world, the fall of online poker has been harder on the game’s less entrenched. For successful poker players at the mid-stakes—anonymous guys who made in the low six-figures online—it has been game over. Soon after busting out of the million-dollar buy-in tournament, Andrew Robl rattles off friends who’ve quit the game to go back to college, enter family businesses and get licenses for brokering real estate and stocks. Robl, who was covered four years ago in Cigar Aficionado, as part of a story on successful young online pros, had already begun migrating into the cash games before online poker had imploded. But at the time, online games accounted for the bulk of his income. “Gambling has taught me that a lot of things happen that are out of your control,” he says. “Sometimes you play every hand perfectly and still lose all your money. So it gave me some perspective. I figured I could support myself, even though life would be less convenient.”

For Robl, the poker world’s shake-up proved to be a formative experience. He adjusted to the live, high-stakes world in terms of both play and demeanor. Picking up the etiquette of playing poker against older, wealthy amateurs, Robl blends in like a favorite son, dressing up a little, not getting overly involved in dissecting hands or making the amateurs feel uncomfortable. Overall, he says, while he misses the convenience of online, he’s one pro who is enjoying the opportunity to play lots of live poker. “It’s more natural to be at a poker table and interacting than it is to be in front of a computer all day,” says Robl. “But I haven’t improved as much since I stopped playing online. Online, I was playing against people better than me all the time. In the live games, I’m usually the best player at the table.”

It’s a good problem for Robl to have, but he’ll be happy when and if he can resume having the option of plying his trade via the Internet. And even though he lives in Las Vegas, where online poker will soon be up and running, the games won’t be big enough for Robl and the liquidity will not be there, at least for the time being. “We need 70,000 players for liquidity,” says Skip Bronson, chairman of US Digital Gaming. Formerly a right-hand man of Steve Wynn, Bronson now heads up a company that he hopes will provide a full menu of services for casinos that want to go online. “But small states will link together as they do for Powerball,” Bronson adds. “Some will be part of a consortium.”

But no doubt, linking those states will come with its own issues and difficulties. Even in cash-strapped California, where live poker is already widespread, legalization remains stalled in a snarl of various special interests that can’t come to agreement despite the obvious upside for all parties involved. “For the states, online poker will generate more tax revenue than anything else out there,” predicts Bronson. “Marijuana is a pittance compared to what online gambling can generate.”

Right now, online poker options for Americans range from illegal and dicey to sociable and cash-free. On the illegal front, there are a handful of rogue sites that still accept money from American players. But they are difficult to find, and collecting money out of them may prove arduous if not impossible. In terms of sociable options, the online game company Zynga attracts millions of participants who play for fun via Facebook. After vociferously denying an interest in eventually entering the for-money poker realm, Zynga recently hired Maytal Ginzburg Olsha, formerly an executive with the online poker operation 888.com, to serve as chief operating officer of new markets. More innovative is the International Federation of Poker, which offers duplicate poker (a spin on duplicate bridge) and pushes Texas hold’em as a mind-sport alongside chess, go and backgammon.

The IFP made a splash last year by putting on a live duplicate poker tournament. Dubbed the Poker Nations Cup, it was played on the London Eye and attracted well-known pros such as Greenstein, Hansen, Vanessa Selbst and David Benyamine. With a component in the offing that can be played via the Internet and will be financed through paid membership, IFP president Peter Alson says, “We’ll be giving people who are jonsing for the game online a way to play. I don’t think our membership will be made up of the guys you’re seeing at the final table of the World Series. But there is a component of people who think about the game very theoretically. They break it down in ways that Doyle Brunson never thought of.”

Meanwhile, in a world where the intense study of theory meets life-changing money (nobody has ever dissected hands as intensely as high-stakes players in the online realm), the British pro Sam Trickett, who made his name online, and Antonio Esfandiari, who had sponsorship deals with both UltimateBet and the defunct VictoryPoker, play heads-up for a first prize of $18.3 million at the Big One for One Drop final table. After Esfandiari takes it down with three 5s, the room explodes and he poses for pictures by draping himself over a mountain of money. On the periphery, watching the festivities unfold, stands Brian Rast, a gifted 32-year-old who made a fortune playing online under the name tasarrast. Though he antes up for the biggest live games going, won last year’s prestigious Poker Player’s Championship for $1.7 million and finished sixth in this event for a $600,000 profit, you still get the impression that he’d rather be home playing on his computer.

Watching his friend Esfandiari getting mobbed by well-wishers, Rast says, “Poker may be the biggest game in America and you can argue that this proves it. People want to do something in which they can use their brains and compete. You don’t need to be a gifted athlete. You just need to be someone who wants to sit down, put up a sum of money and think about things. What’s wrong with that?”